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May 5, 2013 1:27 pm
OSLO, May 5: Norway has proposed raising taxes for the oil and gas sector from 2014, lowering them for traditional industries and closing a loophole for multinationals that move profits to lower-tax countries.
The world's seventh-biggest oil exporter, will lower the amount that energy firms can write down on their investments while non-energy businesses will see their corporate tax rate fall from 28 per cent to 27 per cent.
Starting next year, energy groups would only be able to write off 22 per cent of investment costs from the special energy tax, down from 30 per cent.
“We must increase the industry's cost-consciousness,” Prime Minister Jens Stoltenberg told a news conference. “We see big cost overruns and the state ends up paying for most of it.”
The tax rise for the oil sector will average about NKr3bn ($520m) a year through 2050, while the corporate tax cut will lower revenues by a similar amount, the prime minister said.
Projects in Norway’s offshore sector, which accounts for a fifth of the country’s gross domestic product, have run into huge delays and cost overruns, reducing government revenue and prompting an investigation.
Mr Stoltenberg faces elections in September. Polls indicate that his Labour party will be easily defeated by the centre-right opposition after eight years in office.
The oil industry's marginal tax rate is high by international standards at 78 per cent but the government provides heavy support at the investment phase, including a 78 per cent rebate related to drilling.
As oil prices stay comfortably over $100 a barrel and energy firms make big discoveries in areas once thought close to depleted, Norwegian oil investment is hitting record highs, extending the sector's outlook several decades into the future.
In addition to the corporate tax cut, Norway will close a tax loophole “to avoid multinational corporations shifting taxable profit from Norway to low tax countries”.
This change will save around NKr3bn, financing the overall corporate tax rate cut.
Companies outside the energy sector have been struggling as the oil sector crowds out traditional industries, ramping up wages. Export demand has also been weak because of Europe’s debt problems while a strong currency hurts competitiveness.
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